KSA ministries pursue 'Saudi-ization' of economy

The ministries are looking to decrease the ratio of foreign to Saudi workers and encourage Saudi employment.

REUTERS/Faisal Al Nasser

A foreign laborer works at the construction site of a building in Riyadh, Nov. 27, 2013.

The Ministries of Interior and Labor are working on identifying the commercial sectors and activities that will be fully Saudi-ized. They are studying the sectors that fit with the available human capacity in order to put an end to the foreign labor’s monopoly on some important business sectors in Saudi Arabia, such as wholesale and retail trade.

The work of the two ministries comes within the framework of implementing the decision of the Council of Ministers to Saudi-ize the sectors that make a good financial return and that are appealing to Saudis, who are unable to find jobs in such sectors due to the hiring of foreign workers. In an interview with Al-Hayat, two experts predicted that these activities would start to be identified and that a decision would be implemented by early next year. The steps would gradually be accompanied by follow-up campaigns to prevent [lack of proper action from being covered up] and to confirm the Saudi-ization of these sectors.

Mansour Shathry, chairman of the Labor Market Committee in the Council of Saudi Chambers and board member of the Chamber of Commerce in Riyadh, said that the localization ratios of the system of Nitaqat [Arabic for zones] are determined based on the ratio of jobs that can be localized in each activity. He stressed the need to Saudi-ize some sectors in which Saudi Arabia has an abundance of human capital wishing to work, as well as the sectors that are commensurate with Saudi potential and capabilities. Then, he said, after a sufficient period of time and once the population has increased, other sectors must be Saudi-ized. Shathry added that the decision of the Council of Ministers worked on this basis. “This is being implemented now, as the required percentage of localization in the wholesale and retail trade is higher than the proportion of localization in the contracting activity,” he added.

“As for the Cabinet's decision to Saudi-ize the commercial and professional activities deemed to have a good financial return and to be appealing to the citizens, I expect practical steps aimed at implementing the decision being taken early next year so that, in addition to the Nitaqat program, this could be a great job generator for Saudi young people.”

Concerning the accuracy of the unemployment rates in Saudi Arabia and their ability to truly reflect the reality of the labor market amid the presence of fake Saudi-ization, Shathry said that the unemployment rate announced by the Department of Statistics was a good indicator of the reality of the labor market.

Small and medium enterprises

Human resources specialist Abdullah al-Saeed said that pushing some sectors to full or major Saudi-ization was the ideal solution in the trans-sector Saudi-ization, noting that many small and medium enterprise (SME) owners suffered from the unwillingness of young people to work for them, either due to the difficulty of the profession or because it did not suit their desires. This put them under a great deal of pressure to meet the requirements of the ministries involved with Saudi-ization. Saeed pointed out the difficulty of dismantling some sectors dominated by foreign labor, and stressed that the young people working in these sectors also played a role in the reporting of cover-up cases. He added that the provision of loans to young people ought to be facilitated, especially in the retail sector, as loan application procedures were still difficult and took a lot of time.

Regarding the feminization of certain professions, Saeed confirmed that this had become a necessity, especially in some sectors that did not require skills and fell within the framework of basic education, such as working in bookstores, stationery shops, student services and translation. He added that many young women offer translation services, reporting, summarizing, text editing and typing via ads on social media websites. This sector generates huge amounts of money. Thus, these young women ought to be supported by being provided with soft and easy loans to open their own stores, which will solve the problem of thousands of young women, instead of employing overseas workers in the services sector. Many studies have been done to this effect.

A senior official in the Saudi Ministry of Labor said that many amendments would be made by the end of the year to the Nitaqat program, which imposes employment quotas on certain companies in the private sector in order to encourage businesses to retain Saudi employees and to stabilize Saudi-ization ratios.

After decades of implementing the Saudi-ization policy, which did not show satisfactory results in reducing unemployment among Saudis, the Ministry of Labor in late 2011 amended the quota system in the private sector and imposed stricter penalties on companies that do not abide by local employment quotas. It also forced certain sectors to employ women.

In 2012, the ministry imposed fees on companies amounting to 2,400 Riyals ($640) for each foreign worker above the number of Saudi employees.

Nitaqat program

Ahmad Al-Hemaidan, undersecretary for labor affairs at the Ministry of Labor, said during an interview with Reuters that, in the current program, the ratio of Saudi workers registered in social security was set at 1/13 during the first week of work. This rate would increase gradually to be become a complete one after 13 weeks of joining the company. He added that, as of December 2014, the ratio of workers will be set as a complete one after 26 weeks, or six months as of their registration at social security.

He added that "the ratios of Saudi workers at a company will be considered based on Saudis who have spent the first six months in the company as of next December."

With this step, the minister seeks to give companies more time to adapt to the changes and avoid any sudden complications in case Saudi-ization ratios were below the usual level. This comes within the ministry's policy to encourage companies to appoint Saudis, who usually cost more than expatriates. Foreigners working in Saudi Arabia number about 10 million and hold most of the jobs in the private sector.

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